Nahapet Timiryan

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Case 2:05-bk-38663-ER Doc 42_ Filed 03/26/07 Entered 03/27/07 17:05:46 Desc
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UNITED STATES BANKRUPTCY COURT
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10 CENTRAL DISTRICT OF CALIFCRNIA
41 LOS ANGELES DIVISION
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13 |) in re ) Case No. LA 05-38663-ER
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14 ) Chapter 11
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15 | NALAPET TIMIRYAN, }
} MEMORANDUM OF DECISION
16 \
} Date: May 17, 2006
1? ) Time: 10:00 a.m.
18 Debtor. } Place: Courtroom 1568
) 255 East Temple St.
19 Los Angeles, CA
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21 On May 17, 2006, the Court held a hearing on the Debtor In
22 | possession’s (“Debtor”) Motion for Turnover cf Property of the
23 | Estate (“Mction”). Appearances were as set forth on the record.
24 phe Court denied turnover and entered an order on June 1, 2006.
29 The Court reserved the right to issue this Memorandum of Decision
26 oo ,
explaining its decision.
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AUTHENTICATED /
US. GOVERNMENT onl
INFORMATION
GPO
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!

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I
FACTUAL BACKGROUND

Debtor filed for chapter 11 relief on October 6, 2006. He
was in the mobile medical diagnostic industry through his
corporate entities. Specifically, “Debtor’s corporations owned
medical diagnostic equipment, which was placed at various medical
offices to assist the respective practitioners in conducting
tests for their patients.” Motion at 2. In 2004, the Federal
Bureau of Investigation (“FBI”) began investigating the billing
practices of certain medical offices. Debtor was part of the
investigation since his diagnostic equipment was located at these
offices.

On December 17, 2005,’ the FBI seized vehicles belonging to
the Debtor with a value of approximately $89,973.27 (“Seized
Vebicles”) and funds in an escrow account in the amount of
$477,807.817, in which Debtor had a 50% interest (“Seized Funds”
ancl collectively “Seized Assets”).

Despite numerous requests for return of the Seized Assets,
the FBI has refused to return them. Debtor intends to use the

Seized Assets to fund a plan. Based on the claims filed in this

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This date appears to be a typographical error in the Motion.
According to the Government’s Opposition to Motion
(“Opposition”), the seizure took place in December of 2004, not
2006.

“These funds were the proceeds from a sale of real property.
Motion at 5. The Government further clarifies that the proceeds
were from the sale of real property located at 3138 and 3138 A, 6B
and C Montrose Ave., Glendale, CA and 4037 Liberty Ave., Glendale,
CA. Opposition at 2-3.

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case, Debtor anticipates that the Seized Assets will result in a
100% payment to creditors.

Debtor currently seeks turnover of the Seized Assets on the
grounds that they are property of the estate, and relies on the

Supreme Court’s decision in United States v. Whiting Pools, 462

U.S. 198, 205 (1983) that ‘given the broad scope of the
reorganization estate, property of the debtor repossessed by a
secured creditor falls within this rule, and therefore may be
drawn into the estate.’ Id. at 205-06.” Motion at 6. Debtor
further asserts that “until title to property is adjudicated in
the government by judicial decree, the property is net owned by

the government.” Motion at 6, citing United States v. 92 Buena

Vista _Ave., 507 U.S. 111, 126 (1993).

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Since the Seized Assets are property of the estate, Debtor
cortends that they must be turned over pursuant to § 542. “As

the Supreme Court held in Whiting Pools, this Court may order the

government agency to turn over property of the estate to the
Debtor. The language of Section 542 is mandatory and not
discretionary.” Motion at 7.

Debtor finally argues that equity requires turnover of the
Seized Assets pursuant to § 105(a). No finding of wrongdoing on
Debtor’s part has been made. Debtor seeks return of the Seized
Assets to ensure distributions to his creditors. If they are not
returned, “it is likely that the creditors will not receive any

distribution and this case may have to be converted to a Chapter

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7.% Motion at 8.7
In opposition, the United States of America (the
“Government”) provides that the seizure at issue occurred in

comnection with the FBI investigation of Medical Echodiagnostic
(“Echodiagnostic”), Medical Sonodiagnostic {(“Sonodiagnostic”) and
other independent diagnostic testing facilities (“IDTF”}. “The
IDTFs are suspected of submitting false claims to Medicare for
services never provided . . . and fraudulently receiving millions
of dollars from Medicare.” Opposition at 2. The Government
believes that Debtor owned Echodiagnostic and his wife, Angela
Tirixyan, owned Sonodiagnostic. Declaration of Pio S. Kim in

Support of Opposition (“Kim Declaration”) at 7 3.

In 2004, the FBI search of the IDTFs made Debtor aware of
the investigation. “In October 2004, the Debtor placed the real
properties located at 3138 and 3138 A, B and C Montrose Avenue,

Glendale, California and 4037 Liberty Avenue, Glendale,

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Debtor lists other personal hardships suffered as a result
of the seizure by the FBI at page 8 of the Motion. However,
these personal hardships are not directiy relevant to the
turnover issue and will not be addressed herein.

On May 10, 2006, creditor, Siemens Financial Services
(“Siemens”), filed a Joinder to the Motion (“Joinder”). Siemens
“understands that the primary, if not sole, source of recovery
for creditors is the funds in question. The purpose of
bankruptcy is to protect creditors. Siemens believes that the
scope and purpose of the Bankruptcy Code can be carried out if a
portion of the seized funds are turned over for distribution to
creditors. Once the creditor obligations are satisfied, the
government and/or the Bankruptcy Court may take appropriate
action with respect to any surplus for the Debtor.” Joinder at
2.

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California on the market for sale. In December 2004, upon sale
of the real properties, the FBI seized the funds in the escrow
accounts opened for their sale. The FBI also seized funds from
the Debtor’s personal accounts and two vehicles. A portion of
the seized funds and the vehicles constitute the Subject Assets.”
Opposition at 2-3 (citations omitted); Kim Declaration at FI 4-6.
The seizures were pursuant to seizure warrants. ‘The District
Court “found that there was probable cause to believe that the
assets were subject to seizure and forfeiture because they
constituted or were traceable to the proceeds of the health care
fraud and/or constituted property involved in illegal money
laundering of the proceeds or were traceable to such property.”
Opposition at 3; Kim Declaration at 1 ?.

The FBI’s investigation is not complete and Debtor has not
been indicted on any criminal forfeiture count(s”) with respect
to the Seized Assets. “The government has been prevented from
filing a civil forfeiture complaint against the [Seized Assets]
because of the danger that such a complaint would reveal
sensitive or confidential information about the investigation and
jeopardize the same.” Opposition at 3 {citation and foctnote
omitted).

The Government further contends that the cases cited by
Debtor do not involve forfeiture seizures and are easily

distinguishable. “Whiting Pools concerned a seizure by the

Internal Revenue Service for unpaid tax, and In_re National Safe

Center, Inc. [41 B.R. 195 (Bankr. HI 1984)] involveca a seizure by

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the United States Customs Service for nonpayment of duties and
other charges. Unlike the seizure in the present action, the
seizures in these two cases resulted from the exercise of
administrative powers by federal agencies in the absence of any
judicial finding of probable cause or issuance of seizure
warrants. In other words, the agencies did not take possession
of the assets for forfeiture to the government, but merely acted
as a creditor collecting on debts.” Opposition at 8.

The Government asserts that the District Court’s decision in

In re Thena, 190 B.R. 407, 412 (D. Ore. 1995) is more helpful

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than the foregoing cases. In Ihena, the government seized
certain assets on the grounds that they were involved in money
laundering. The debtor therein filed for chapter 11 relief prior
to the issuance of any indictment. The Thena court reasoned that
at the time of filing, debtor held legal title to the assets at
issue, but could not direct their use. Consequently, the
“authority to ‘use, sell, or lease’ the seized property,
therefore, is not includable as property of the estate under 11
U.€.C. sections 363 or 541. .. .” Thena, 190 B.R. at 412, Based
on the foregoing, the Government asserts that the Seized Assets
are not subject to forfeiture.*

Debtor believes that this case is distinguishable from

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The Government also argues that the automatic stay is not
applicable herein under 11 U.S.C. § 362/b) (4). This argument
will not be addressed herein, since the Court is deciding the
Motion based on the nature of the Seized Assets.~

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Thena. Specifically, Debtor argues that in Thena, “seizure was
made for a violent crime and the debtor in that case immediately
filed bankruptcy for the purpose of obtaining a turnover. Unlike
[Thana], here, the seizure occurred in December of 2004. The
Debtor waited almost one year and, as a result of other
financial/creditor pressure, commenced the instant case,

Debtor did not immediately seek turnover of the Seized Assets.
Instead, the Debtor sought a bar date and served all creditors,
including the Government, with the bar date notice.” Reply to
Opposition (“Reply”) at 6.

It
DISCUSSION

In deciding whether turnover is appropriate herein, the real
issue before the Court is whether the provisions of the
Barkruptcy Code should trump the federal forfeiture statutes or
vice versa. Debtor’s main argument is that the Seized Assets are
property of the estate. Technically, Debtor appears correct.
There has been no adjudication of the forfeiture issue. In fact,
no civil or criminal forfeiture preceedings have even been
commenced against Debtor. Consequently, the Seized Assets appear
to be property of the estate subject to turnover under section

542 (a). See 92 Buena Vista Avenue, 507 U.S. at 127.

However, while the Government does not dispute that Debtor
has an interest in the Seized Assets, its position is that the
estate does not own 100% of this interest. Specifically, the

Government relies on Thena, which analogizes this situation to

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that of a trust. A debtor may own legal title to a trust, but

have no beneficial interest in it.

Thus, .. . the property of the estate includes the
legal title, but not the beneficial interest in the
property. . . . In short, Chapter 11 does not permit

the estate’s inclusion of property which did not exist,

at the time of filing, for the debtor’s beneficial,

equitable use. Again, Congress promulgated Chapter 11

to protect, rather than enhance, the debtor’s estate.
Thena, 190 B.R. at 412.

In the case of forfeiture, if property is seized
prepetition, a debtor has no “equitable right to direct the

seized property for the debtor’s benefit. . . . The authority to

‘use, sell, or lease’ the seized property, therefore, is not

or 541, ... .” Id. Consequently, the Thena court concludes
that the seized property is not subject to turnover.

Debtor argues that Thena is distinguishable factually in
that: (i) the debtor in that case filed bankruptcy within two
months of the seizure; and (ii) a violent crime prompted the
forfeiture proceedings. Debtor attempts to make himself appear
more “innocent,” because he filed bankruptcy more than a year
after the seizure, and had to file due to financial hardships
caused by the seizure. However, a debtor’s motive for filing
par.kruptcy does not appear to expressly weigh into the Thena
court’s reasoning as demonstrated above.

While Thena is not binding on this Court, it appears to be

well reasoned and allows the Court to prevent a potential

bankruptcy abuse. Specifically, if the Court were to hold

includable in property of the estate under 11 U.S.C. sections 363

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otherwise, entities subject to forfeiture proceedings could
“undo” any prepetition seizures by filing bankruptcy and seeking

turnover. In addition, unlike the IRS in Whiting Pools, which

had a lien on the levied property therein, the Government would
appear to be left with a fourth priority distribution claim under
11 U.S.C. § 726(a) (4), and would arguably be worse off than a

general unsecured creditor. See Whiting Pools, 462 U.S. at 20?

(“The Bankruptcy Code provides secured creditors various rights,
including the right to adequate protection, and these rights
replace the protection afforded by possession.”}). In sum,
holding otherwise could potentially render the federal forfeiture
statutes meaningless.

IIt
CONCLUSION

Based on the foregoing, the Motion is denied based on Thena.
While the estate may hold legal title to the Seized Assets, it

does not possess the authority to use, sell or lease them.

DATED: Macifh 26-807

S Ata bee
—7 ERNEST M. ROBLES
United States Bankruptcy Judge

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CERTIFICATE OF SERVICE

oa .
* font,
I, Caabiebe Jhb , hereby certify that on
= (FE [or Bigfoot oo) , T sent by regular mail a

true copy of the Memorandum of Decision on the parties at the
addresses listed below:

David B. Golubchik, Esq.

Levene, Neale, Bender, Rankin & Brill
10250 Constellation Blvd., Ste. 1700
Los Angeles, CA 90067

Nahapet Timiryan
508 Glenwood Road, #103
Glendale, CA 91202

Pio S. Kim, Esq.

Assistant United States Attorney
United States Courthouse

312 N. Spring St., 14 Flr.

Los Angeles, CA 90012

Bill Goldman

TGA, LLC

9 Alexandria Drive

Fast Hanover, New Jersey 07936

Caabiieln Huerta

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